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Health Insurance, the Social Welfare System and Household Saving

  • Hsu, Minchung

This paper studies the factors that can generate the puzzling saving phenomenon in the US: 1) Starr-McCluer (1996) finds that households covered by private health insurance save more than comparable households without coverage, even when controlling for other variables. 2) The asset holding ratio of the insured to the uninsured decreases with increased income level. This paper suggests that institutional factors, in particular, a means-tested social welfare system and an employmentbased health insurance system, can account for the phenomenon. I develop a dynamic equilibrium model, and show that the model economy presents the same saving pattern as in the US and that the empirical finding as in Starr-McCluer (1996) is replicated. Implications for empirical approaches to testing the precautionary saving hypothesis are also provided.

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File URL: http://mpra.ub.uni-muenchen.de/21281/1/MPRA_paper_21281.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21281.

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Date of creation: 2008
Date of revision: 2010
Handle: RePEc:pra:mprapa:21281
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  1. J. Gruber & A. Yelowitz, . "Public Health Insurance and Private Savings," Institute for Research on Poverty Discussion Papers 1135-97, University of Wisconsin Institute for Research on Poverty.
  2. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  3. Alessandra Guariglia & Mariacristina Rossi, 2003. "Private Medical Insurance and Saving: Evidence from the British Household Panel Survey," CEIS Research Paper 39, Tor Vergata University, CEIS.
  4. Alex Maynard & Jiaping Qiu, 2009. "Public insurance and private savings: who is affected and by how much?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(2), pages 282-308, 03.
  5. Daniel Feenberg & Jonathan Skinner, 1992. "The Risk and Duration of Catastrophic Health Care Expenditures," NBER Working Papers 4147, National Bureau of Economic Research, Inc.
  6. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers 3-95, Wharton School Rodney L. White Center for Financial Research.
  7. Starr-McCluer, Martha, 1996. "Health Insurance and Precautionary Savings," American Economic Review, American Economic Association, vol. 86(1), pages 285-95, March.
  8. Katherine Swartz, 2003. "Reinsuring Risk to Increase Access to Health Insurance," American Economic Review, American Economic Association, vol. 93(2), pages 283-287, May.
  9. Aiyagari, S Rao, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 659-84, August.
  10. Mariacristina De Nardi & Eric French & John Bailey Jones, 2006. "Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles," NBER Working Papers 12554, National Bureau of Economic Research, Inc.
  11. Chou, Shin-Yi & Liu, Jin-Tan & Hammitt, James K., 2003. "National Health Insurance and precautionary saving: evidence from Taiwan," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1873-1894, September.
  12. McGarry, Kathleen, 2002. "Public Policy and the U.S. Health Insurance Market: Direct and Indirect Provision of Insurance," National Tax Journal, National Tax Association, vol. 55(4), pages 789-827, December.
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